A key House subcommittee yesterday approved a cut of $33 million in the federal payment to the city, threatening to plunge the cash-strapped District government into deeper financial crisis.
Mayor Marion Barry had been counting on a payment of $61.8 million to close a potential budget deficit projected to be at least $170 million. But yesterday, the House District Appropriations subcommittee recommended a payment of only $28.8 million.
If upheld by the full Appropriations Committee and by the House and the Senate, yesterday's action means that Barry's budget-balancing plan will fall more than $30 million short -- unless new sources of revenue are found or further layoffs or program cuts imposed.
"We think there is going to be a catastrophic impact on the operations of the District," City Administrator Elijah B. Rogers glumly told reporters yesterday. Rogers said the cut could be devastating to the city government, which for months has been scurrying frantically for a solution and bickering among its own branches to place blame for what many consider the worst financial crisis in the city's history.
New evidence of that infighting came to light yesterday when a Rockville catering firm that supplies 22,000 meals a day for elementary schoolchildren in the city disclosed that squabbling between the Barry administration and D.C. school officials has resulted in an unpaid bill of $675,000.
Vendor Michael Waters, vice president of Waters' Catering Service, said he currently has no intention of cutting off the school lunches and breakfasts he supplies despite the unpaid bill, but warned that "this cannot go on indefinitely."
Waters, a black businessman, said all of his payments should be marked "special attention," because of his minority business status.The lag in the school system's payments, he said, is sure to hurt his credit rating and reflect poorly on minority businesses.
"Right now, if our company wasn't quite as solid as it is, we'd probably be out of business," Waters said.
Although Mayor Barry has pledged his administration to furthering minority businesses in the city, numerous minority entrepreneurs have complained that the city's frequent late payments make it difficult for them to remain solvent.
"This is really hurting minority businesses," Waters said of the city government's practices.
The House subcommittee acted yesterday on a request for a supplemental federal payment, to be added to the $238.2 million approved by Congress last year. The federal payment is designed to compensate the city for loss of revenues from tax exempt federally owned land, and for the extra costs incurred by the city because it is the nation's capital. In recent years, the federal payment has been granted in two installments.
Some city officials had been cautiously optimistic about the prospect of greater funds from Congress since Rep. Julian Dixon (D-Calif.) a native Washingtonian, became chairman of the subcommittee earlier this year.
But yesterday, it was Dixon who recommended the reduced spending levels that were adopted virtually unchanged by a 6-to-2 vote. "Anything more than 50 percent of the city's request would be hard to sell" to the rest of Congress, Dixon said.
Rep. Carl D. Pursell (R-Mich.), the panel's ranking minority member, noted that federal agencies are faced with proportionately deeper cuts at the hands of other subcommittees as Congress strives to balance the federal budget.
Referring to the proposed $28.8 million supplemental payment, Pursell told city officials, "If you can get that . . . you ought to take it. You'd be a winner . . .I would be very much surprised if the Senate comes up to this level."
In adopting its recommendation, the House panel rejected a long list of specific spending proposals made by the District. It recommended sharp reductions in outlays for fuel oil and other supplies at city hospitals and prisons.
It denied over $3 million that city officials said was necessary for food, medicine, clothing and energy costs at the city jail and prisons. With this cut, Rogers said, "The ability to maintain security will become a major problem."
Because of cuts in energy costs, Rogers said the Fire Department may have to close one fire company and one ambulance company.
The congressional panel granted $5.2 million toward financing the 7 percent pay increase granted to city employes last October, $7 million less than the city requested.
Of $7 million sought by the city for general public assistance, a program that currently pays $180 a month to more than 7,500 disabled people not currently qualified for other city welfare benefits, the subcommittee granted only $3.5 million.
On the verge of tears, Laura Mackin, lawyer for Neighborhood Legal Services, which represents clients of the program, warned that "4,700 people will be dropped" from benefits. Rogers said later that reductions in this or other programs would have to be made by June.
The subcommittee also refused funds earmarked for the city to collect $10 million in overdue water and sewer bills and $6 million in other delinquent taxes, threatening a further increase in the city deficit, Rogers said.
Rogers said that if the reduction is upheld, it "is going to be very painful . . . Services are going to be further reduced . . . there are going to have to be more layoffs."
Barry has already proposed eliminating 1,540 jobs from the city payroll, including 403 layoffs, as well as $24 million in new taxes and license fees and widespread program cuts.
Waters, the Rockville caterer, is caught in the middle of a bureaucratic struggle between the school system and the Barry administration over a reserve of $20 million, which school system officials said they have been building up with funds left over from previous fiscal years.
Included in the fund is $8 million from money schoolchildren have paid for lunches and funds received for school meals from the U.S. Department of Agriculture.
D.C. officials insist that the $20 million automatically reverted back to the city treasury, because the school system did not spend the money in the years it was appropriated. They have directed the school system to pay its bills out of this year's budget.
The school system, meanwhile, is accusing the city of taking its $20 million, including the lunch money paid by the children, to pay for deficits in other city agencies. Those agencies are overspending their budgets this year and have been ordered by the mayor to cut back on their spending, school officials say.
James R. Boyle, the school system's controller, says it will be virtually impossible for the system to pay its vendors, including Waters, with funds from this year's budget since the system already faces a deficit of $4 million. f
With the subcommittee's action yesterday, the schools will have to find a way to cut an additional $12 million from the budget.